UK businesses must embrace diversity to avoid impending workforce shortages, according to new figures from Mercer.

• UK workforce shortage will hit 1.9 million by 2025
• Gaps to be filled by underrepresented labour sources
• Recruitment and retention strategies must change to reduce reliance on traditional talent pools
• Mercer framework helps businesses build a diverse, inclusive workforce

 Figures compiled by the HR consulting firm project that by 2025, the UK will have a 1.9 million shortfall in the workforce if labour demand continues to increase at the same rate as the last 10 years.

The shortfall is compounded by a dramatic decline in the number of foreign-born workers entering the UK job market from Q3 2017 to Q3 2018 – down by 93,000 EU-born workers and 38,000 Non-EU born workers. This is the fastest rate of decline since records began in 1997, as the impact of the Brexit vote begins to be realised.

Job vacancies on the rise

The rise in job vacancies is also at its highest since 2001, at 845,000 for August to October 2018, up by 44,000 from a year earlier. With 43,000 fewer people looking for work, companies are already starting to feel the impact of a competitive and scarce talent pool.

Underpinning the analysis is a post-Brexit net migration assumption of 100,000 per year. This is consistent with the Treasury’s recent paper “EU Exit – Long-term Economic Analysis”, which assumes a net zero EU migration scenario and ultimately results in a £40 billion hit to the economy. This assumption could well turn out to be optimistic, with net EU migration having fallen by 115,000 to 74,000 in the last two years and an ageing EU demographic making migration increasingly less common.

However, detailed analysis of untapped UK talent pools by Mercer reveals that by implementing measures to focus on underrepresented labour sources and embrace diversity, businesses are capable of plugging the gap. Achieving this would require most employers to change their mindset and establish a strategy for recruitment and retention that’s fit for this new age.

Gary Simmons, Partner at Mercer, said: “It has been 70 years since the UK experienced such severe workforce shortages. With Brexit and the ability of the UK government to restrict immigration from the EU, businesses must act now to address the impending labour shortage. Plugging the gap is not going to be easy, but it is achievable. Creating a workplace appealing to all, irrespective of age, gender, sexual orientation, disability and ethnic background is a business necessity.”

Based on research across underrepresented groups in the workforce, including people with disabilities, older and female workers, Mercer has identified significant untapped resource and sets a realistic target of attracting almost 1.8 million workers by 2025 to meet the majority of the shortfall.

• Older workers– According to the Mercer Workforce Monitor, the number of over 50s in the workforce will increase by 14% between 2015 and 2030, while under 30s will decline from 25% to 23%, making retaining and attracting older workers key. With the baby boomer generation now moving through to retirement and gradual increase of the state pension age, strategies to slow the rate of retiring 9could increase the workforce by 900,000 by 2025
• Workers with disabilities– Over the past five years, the number of people with disabilities in the workforce has increased from 51% to 56%, an increase of 817,000. Measures to increase participation at a similar pace by 2025 could add 475,000 to the workforce
• Female workers– Mercer’s analysis shows the main driver of under-representation of women in the 20-50 years old bracket of the workforce is that they are not entering the workforce at all, rather than the commonly-held notion that it’s driven by childcare needs.  With female participation having increased from 60% to 66% over the last ten years, strategies to increase participation by a further 5% by 2025 would add an additional 400,000workers

Based on experience advising clients on how to address the impending workforce crisis, Mercer has set out a framework to facilitate a change in mindset and create a truly inclusive culture in UK businesses.

1. Facilitate entry– fundamentally change accessibility through information sharing, reevaluating entry criteria and improving foundation skills in workers of all ages
2. Enable re-entry– foster a wholesale culture shift from assessing candidates based on entry level qualifications to learning in all stages of life by establishing returner programmes, implementing measures to build confidence and educating and retraining employees
3. Foster a thriving workforce– embrace adaptive working through all policies and procedures by building an inclusive culture, personalising the employee value proposition (EVP) and developing technology that supports and empowers people with disabilities.

“Businesses have the power to create a positive vision for the UK workforce by truly embracing diversity and putting the necessary steps in place to foster a more inclusive workforce and culture. Clearly, government policy will play an important role, but it is incumbent on businesses to take the necessary steps themselves and reduce their over-reliance on traditional talent pools.”

 

Garry Simmons.